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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






2. Demand for a resource like labor is derived from the demand for the goods produced by the resource






3. Entry of new firms shifts the cost curves for all firms upward






4. Two goods are consumer substitutes if they provide essentially the same utility to consumers






5. A good for which higher income increases demand






6. Ed > 1 - meaning consumers are price sensitive






7. Models where firms agree to mutually improve their situation






8. The change in quantity demanded resulting from a change in the price of one good relative to other goods






9. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






10. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






11. The most desirable alternative given up as the result of a decision






12. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






13. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






14. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






15. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






16. The additional benefit received from the consumption of the next unit of a good or service






17. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






18. The mechanism for combining production resources - with existing technology - into finished goods and services






19. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






20. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






21. Costs that change with the level of output. If output is zero - so are TVCs.






22. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






23. A firm that has market power in the factor market (a wage-setter)






24. Ed = 8 - infinite change in demand to price change






25. When firms focus their resources on production of goods for which they have comparative advantage






26. Entry (or exit) of firms does not shift the cost curves of firms in the industry






27. Es = (%dQs) / (%dPrice)






28. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






29. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






30. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






31. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






32. The rational decision maker chooses an action if MB = MC






33. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






34. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






35. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






36. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






37. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






38. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






39. The additional cost incurred from the consumption of the next unit of a good or a service






40. Ed = (%dQd)/(%dP). Ignore negative sign






41. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






42. The price of a good measured in units of currency






43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






44. Total product divided by labor employed. APL = TPL/L






45. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






46. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






47. Ed < 1






48. The lost net benefit to society caused by a movement away from the competitive market equilibrium






49. The total quantity - or total output of a good produced at each quantity of labor employed






50. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter